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Friday, May 18, 2012

An Epic Day Living Up To Expectation

It was option expiration, the Greeks were looking to drop the Euro, but most of all, it was FB's first day of IPO.  And no, FB did not finish up 10% or even 5%.  It finished barely flat with a few cents above the offering price of 38.  At times, it look really pathetic to see how the underwriters desperately defended 38.  It was an epic day.

Essentially FB stumbled out of the gate when trading was delayed for some 30 minutes because Nasdaq couldn't handle the trading demand.  It choked and all of the FB proxies got murdered.  Here are the forensics for the victims that I track:

GSVC, a fund company that owns FB shares, down over 18%.

ZNGA, Facebook's major revenue generating partner, down over 15%. The trading even got halted twice during the day!

RENN, the Chinese facebook down over 21%.

YELP, another social networking company, down over 12%.  It reached the, at the time far fetched, target as documented here.   I picked up a few shares there at 18.21 just because I planned for it.  The_Real_Fly picked up more earlier today on top of his 30% allocation in his portfolio.  I hope he's not leveraged with margins!  (He's now up 3% year to date from 20% just a month back.  Mean reversion at work.)

I was surprised to see that SINA, the Chinse twitter, came out relatively unscathed, down only 1.5%.  

It was epic.  It felt like the end of the world.  You can say all these were highly speculative and broken charts to start with, but look at GOOG.  Just earlier this week, it had a strong breakout of the 50 Fib neckline with volume confirmation.  Today, the shares were sold off in volume!  Down 3.6%.  No matter how good a chart look, stop loss is paramount!

When the tsunami comes, it doesn't matter what kind of boat you're in, you get swept away just the same.  Even the charts that had been sitting pretty watching the rest of the market suffer in the recent past, they couldn't escape the selling today.

AMZN broke down of the consolidation and started to fill the gap.  Down over 2%.

Can't go without mentioning AAPL.  It finished flat, but it really looked and felt bad because in the morning AAPL rallied as much as 2.5%, and it gave up ALL of the gain and finished near the low!  FloridaTrader has been simply amazing.   Too bad it's too late to shadow his trades as per my earlier post, Allow the Knife to Stick to the Ground.  He said it himself, if you're not short as earlier as he did, he wouldn't want to chase with the short because a bear market bounce can come any time, especially given the oversold conditions we're in right now.  On the other hand, he can afford to hold on or even add to his short positions because an oversold condition can last for days and he has ample cushions to work with.   He's certainly in an enviable position.

All the people on the sideline can do now is to be glad they are on the sideline.  Don't be greedy and chase to get in on the short bandwagon.  Just sit this one out and wait for the market to bottom, which will not be a one day event by the way.   So time to do some studying and go back to your hobbies.  The last thing one can do now is to be naughty and play hero: go stand in front of the freight train and go aggressively long.  That said, if you really want to risk your trading "life", the payoff could be big. After all, we are at the 129.31 target with the SPY, see Market Musing & Targets I posted yesterday.  It's best to wait for it to bounce and retest.

Epic day!  Enjoy the weekend!


  1. Replies
    1. Thanks! BTW, ZNGA isn't going away any time soon.